Financial exchange system and method for processing retail price improvement orders

ABSTRACT

An exchange order fulfillment method comprises receiving, by at least one processor of an electronic exchange, a plurality of electronic communications comprising orders for trades of one or more financial instruments, at least one order comprising an amount of price improvement to be applied to one of a protected national best bid (NBB) or a protected national best offer (NBO) of a financial instrument for a trade. The method further includes fulfilling, by the at least one processor, the order when the amount of the price improvement is more aggressive than a specified value of aggressiveness relative to the one of the protected NBB or the protected NBO of the financial instrument and reporting information associated with fulfillment of the order.

CROSS-REFERENCE TO RELATED APPLICATIONS

This application is a continuation of U.S. application Ser. No.16/557,627, filed Aug. 30, 2019, which is a continuation of U.S.application Ser. No. 14/217,131, filed Mar. 17, 2014, and issued on Sep.3, 2019, as U.S. Pat. No. 10,402,902, which claims the benefit ofpriority to U.S. Provisional Application No. 61/793,877, filed Mar. 15,2013, entitled “Financial Exchange System and Method for ProcessingRetail Price Improvement Orders,” the entire contents of which arehereby incorporated by reference. This application also is related toU.S. Provisional Application No. 61/657,019, filed Jun. 7, 2012,entitled “Financial Exchange Auction Systems and Methods” and U.S.Non-provisional application Ser. No. 13/910,787, filed Jun. 6, 2013,entitled “Financial Exchange Auction Systems and Methods,” the entirecontents of which are hereby incorporated by reference.

FEDERALLY SPONSORED RESEARCH OR DEVELOPMENT

Not Applicable.

COMPACT DISK APPENDIX

Not Applicable.

BACKGROUND

A financial exchange is a market, physical or electronic, in whichshares, options, derivatives, futures, and other units of financialinstruments are bought and sold. Financial instruments, for example,include equities, securities, stocks, options, bonds, commodities,indexes, exchange-traded funds, and other instruments.

A financial exchange matches bids to buy a particular financialinstrument with offers to sell that particular financial instrument andtracks the price and volume at which a trade for the financialinstrument can be executed. The introduction of electronic tradingsystems into such exchanges has enabled investors to place orders forfinancial instruments over a computer network and receive the status oforders in near real time. These trading systems also report prices atwhich financial instruments are quoted, bought, and sold to reportingentities that consolidate and disseminate trading information forvarious financial instruments.

Brokers represent clients in buying or selling financial productsthrough a particular exchange, as well as in obtaining marketinformation from the exchanges for clients regarding market activity. Atransaction may be completed when one or more buy and sell orders can bematched with respect to price.

One advantage of such trading systems is that marketable ordersgenerally can be executed immediately against available contra-sideinterests. An order is marketable when it is priced equal to or moreaggressively than the contra side interest. For example, a buy order fora financial instrument is marketable when it is priced equal to or moreaggressively than the current best offer for the financial instrument,and a sell order for a financial instrument is marketable when it ispriced equal to or more aggressively than the current best bid for thefinancial instrument. In this context, more aggressive means higher fora bid to buy or lower for an offer to sell.

Lower levels of liquidity lead to greater bid-ask spreads, (e.g.,spreads in prices between bids and offers) larger discrepancies betweennet asset value and the value of the underlying securities, and adecreased ability to trade profitably. It is preferable to reduce thedifference in prices between the best bid to buy and the best offer tosell. Such a tighter market is better for market participants.

Various market centers (e.g., including exchanges, alternative tradingsystems, and crossing networks) offer investors the opportunity toparticipate in a scheduled auction process throughout the trading day.In an auction process, the price of a particular financial instrumentoffering is set after receiving all bids to buy and offers to sell anddetermining the highest price at which the total offering can be sold.In this type of auction, investors place a bid for a particularfinancial instrument they want to buy. The bid or buy order includes adesired quantity (e.g., number of shares) and a desired per unit price.Auction processes may include, for example, opening auctions, closingauctions, or intra-day auctions. Depending on the venue and the time ofday, the auction may include different order types. Example order typesinclude limit orders, market orders, auction-only orders, other orders,or any combination or limitation thereof.

Various market centers also offer investors the opportunity to tradesecurities during the trading day (intra-day trading) by placing one ormore orders. Example order types for intra-day trading also includelimit orders, market orders, auction-only orders, other orders, or anycommunication or limitation thereof.

SUMMARY

Implementations of the present disclosure involve a system and/or methodfor fulfilling orders in which at least one order comprises a retailprice improvement (RPI) order that may be used in security transactionsthat follow a price/time priority model. The orders may be fulfilledbased upon an aggressiveness of a respective interest value relative toan interest value of the at least one RPI. According to one aspect, anexchange order fulfillment method includes an exchange order fulfillmentmethod comprising receiving, by at least one processor, a plurality oforders for trading an underlying security, at least one of the orderscomprising a retail price improvement (RPI) order having an interestvalue that is more aggressive than one of a protected national best bid(NBB) and a protected national best offer (NBO) of the underlyingsecurity, and fulfilling, by the at least one processor, the pluralityof orders based upon an aggressiveness of a respective interest valuefor each of the plurality of orders relative to the one of the protectedNBB and the protected NBO of the underlying security.

According to another aspect, an exchange order fulfillment systemincludes at least one processor to receive a plurality of orders fortrading an underlying security, at least one of the orders comprising aretail price improvement (RPI) order having an interest value that ismore aggressive than one of a protected national best bid (NBB) and aprotected national best offer (NBO) of the underlying security, andfulfill the plurality of orders based upon an aggressiveness of arespective interest value for each of the plurality of orders relativeto the one of the protected NBB and the protected NBO of the underlyingsecurity.

According to yet another aspect, a non-transitory computer-readablemedium includes instructions stored thereon that, when executed by atleast one processor, cause the at least one processor to performoperations comprising receiving a plurality of orders for trading anunderlying security, at least one of the orders comprising a retailprice improvement (RPI) order having an interest value that is moreaggressive than one of a protected national best bid (NBB) and aprotected national best offer (NBO) of the underlying security, andfulfilling the plurality of orders based upon an aggressiveness of arespective interest value for each of the plurality of orders relativeto the one of the protected NBB and the protected NBO of the underlyingsecurity.

In yet another aspect, an exchange order fulfillment method comprisesreceiving, by at least one processor of an electronic exchange, aplurality of electronic communications from participant computingdevices via a communication network, each of the participant computingdevices in communication with a particular port provided by theelectronic exchange, the communications comprising orders for trades ofone or more financial instruments in a message format comprising one ormore tags and associated with a message protocol, at least one of theorders from one of the participant computing devices comprising aplurality of tags identifying a financial instrument for a trade, anorder side, and an amount of price improvement to be applied to one of aprotected national best bid (NBB) or a protected national best offer(NBO) of the financial instrument for the trade. The method furtherincludes fulfilling, by the at least one processor, the at least oneorder when the amount of the price improvement is more aggressive than aspecified value of aggressiveness relative to the one of the protectedNBB or the protected NBO of the financial instrument. The method furtherincludes reporting information associated with fulfillment of the atleast one order to at least one of the participant computing devices inthe message format using the particular port or to a consolidated datastream at a particular interval of time for display on a user interfaceof the one of the participant computing devices.

In yet another aspect, an exchange order fulfillment system comprises atleast one processor of an electronic exchange to receive a plurality ofelectronic communications from participant computing devices via acommunication network, each of the participant computing devices incommunication with a particular port provided by the electronicexchange, the communications comprising orders for trades of one or morefinancial instruments in a message format comprising one or more tagsand associated with a message protocol, at least one of the orderscomprising a plurality of tags identifying a financial instrument for atrade, an order side, and an amount of price improvement to be appliedto one of a protected national best bid (NBB) or a protected nationalbest offer (NBO) of the financial instrument for the trade. Theprocessor fulfills the at least one order when the amount of the priceimprovement is more aggressive than a specified value of aggressivenessrelative to the one of the protected NBB or the protected NBO of thefinancial instrument. The processor reports information associated withfulfillment of the at least one order to at least one of the participantcomputing devices using the particular port in the message format or toa consolidated data stream at a particular interval of time for displayon a user interface of the one of the participant computing devices.

In yet another aspect, a non-transitory computer-readable medium havinginstructions stored thereon that, when executed by at least oneprocessor of an electronic exchange, cause the at least one processor toperform operations comprising receiving a plurality of electroniccommunications from participant computing devices via a communicationnetwork, each of the participant computing devices in communication witha particular port provided by the electronic exchange, thecommunications comprising orders for trades of one or more financialinstruments in a message format comprising one or more tags andassociated with a message protocol, at least one of the orderscomprising a plurality of tags identifying a financial instrument for atrade, an order side, and an amount of price improvement to be appliedto one of a protected national best bid (NBB) or a protected nationalbest offer (NBO) of the financial instrument for the trade. Theoperations further include fulfilling the at least one order when theamount of the price improvement is more aggressive than a specifiedvalue of aggressiveness relative to the one of the protected NBB or theprotected NBO of the financial instrument. The operations furtherinclude reporting information associated with fulfillment of the atleast one order to at least one of at least one participant computingdevice in the message format using the particular port or to aconsolidated data stream at a particular interval of time for display ona user interface of the one of the participant computing devices.

These and other aspects, features, and benefits of the presentdisclosure will become apparent from the following detailed writtendescription of the preferred embodiments and aspects taken inconjunction with the following drawings, although variations andmodifications thereto may be effected without departing from the spiritand scope of the novel concepts of the disclosure.

BRIEF DESCRIPTION OF THE DRAWINGS

FIG. 1A is a block diagram of a retail price improvement (RPI) financialexchange system according to one aspect of the present disclosure.

FIG. IB depicts a block diagram of an example participant computingdevice according to one aspect of the RPI financial exchange system.

FIG. 1C depicts an example data source according to an aspect of the RPIfinancial exchange system.

FIG. ID illustrates an order transaction table showing order detail datafor example orders according to an example embodiment.

FIG. 2 depicts example message format data for an order that isstructured according to a financial information exchange (FIX) protocolaccording to an example embodiment.

FIG. 3 is a block diagram of an RPI financial exchange server thatincludes an RPI financial exchange application according to an exampleembodiment.

FIG. 4 is a flowchart depicting an example process for fulfilling atrade using a RPI order according to an example embodiment.

FIG. 5 is a block diagram depicting a general purpose computer that maybe used in accordance with the present disclosure.

FIG. 6 depicts an exemplary financial exchange computing system thatincludes an RPI financial exchange system in accordance with exampleembodiments.

DETAILED DESCRIPTION

Implementations of the present disclosure involve a retail priceimprovement financial exchange system and method that includes retailprice improvement (RPI) orders that may be used in security transactionsthat follow a price/time priority model. That is, multiple ordersincluding one or more RPI orders placed for a given security may befulfilled based on an aggressiveness of an interest value of each RPIorder relative to an interest value of other orders. Embodiments of sucha RPI order may attract additional retail order flow to the exchangesystem while also providing the potential for price improvement to suchorder flow. In this context, the term “more aggressive” means a higherinterest value for a bid to buy or a lower interest value for an offerfor sale.

A share, as used herein, is a unit of ownership of a financialinstrument and is not limited to a unit of ownership of a stock, orother equity. The financial exchange system operates similarly toconventional financial exchanges in that records of all the trades ororders made in the financial exchange system may be logged and data fromorders eligible for execution generally are listed on the exchange'sbook (e.g. resting shares).

FIGS. 1A through 1C depict an example retail price improvement (RPI)financial exchange system 100 according to aspects of the disclosure.The system 100 includes one or more RPI financial exchange servers 102with one or more processors or other computing devices or systems thatinclude an RPI financial exchange application 104 and a data source 106.As will be described in detail below, the RPI financial exchangeapplication 104, among other things, receives orders including one ormore retail price improvement (RPI) orders and fulfills the RPI orderaccording to a price/time priority model. That is, the RPI financialexchange application 104 processes incoming RPI orders based upon theaggressiveness of an interest value relative to other interest values ofother orders for the same security. The RPI financial exchange system100 may operate at or in connection with an electronic financialexchange.

The server 102 is a typical server utilized by financial exchanges forprocessing trades as well as keeping track of trade prices and updatingvarious types of market information. The server 102 may be a server orother computer or computing device or system that includes at least oneprocessor, the application 104, and the data source 106 stored locallyin a memory or in a memory in a remote computer or computers. The memoryincludes a computer readable media/medium. A server, a computer, acomputer device, and a computing device are examples of computinghardware. The processor and the memory are other examples of hardware.Hardware is a physical device.

In one example, the servers 102 is associated with a financial exchange,such as a local financial exchange, and are configured to receiveorders, order data, and/or other data and/or communications from and/ortransmit orders, order data, and/or other data and/or communications toone or more participant computing devices using a network. In anexemplary embodiment, the orders and order data are associated with RPIorders.

According to one aspect, the server 102 includes a client communicationinterface (not shown). The client communication interface receivescommunications from and/or transmits communications to one or moremarket participants, servers, and/or other computers. In one example,the client communication interface provides a port for one or moremarket participant computing devices to enable point-to-pointcommunications between the server 102 and a particular marketparticipant computing device connected to that port orpoint-to-multipoint communications between the server 102 and multiplemarket participant computing devices connected to one or more ports. Asa result, each of the market participant computing devices can beconnected to the client communication interface via a same or differentport in one embodiment. The port optionally may be a dedicated port.

One or more market participant computing devices 108 a-108 n may connectto the exchange system 100 using a network 110. The one or more marketparticipant computing devices 108 a-108 n may be conventional computers,laptops, smart phones, or tablet computers connected to the network 110and configured to send and receive information for conducting trades andviewing market information. The exchange system 100 may be configured toallow market participant computing devices 108 a-108 n to place ordersfor financial instruments over the network as well as view and accessany trading information for various financial instruments. The server102 includes a processor 302 (FIG. 3) that executes the RPI financialexchange application 104 stored in volatile and/or non-volatile memory304 (e.g., computer readable media) using the data source 106. Examplesof a server 102 include one or more servers, personal computers, mobilecomputers and/or other mobile devices, and other computing devices. Theserver 102 may communicate via wireless and/or wireline communications.

The application 104 receives one or more orders, order information,and/or other data and/or communications from one or more remoteparticipant computing devices 108 a-108 n or other computer systems ordevices via a communication network 110. The application 104 alsotransmits order information (such as information for executed orders orreconciliation or payment information) and/or other data and/orcommunications to the computing devices 108 a-108 n or other computersystems or devices via the communication network 110. As will bedescribed in detail below, the financial exchange system 100 processesRPI orders using a price/time model in which the RPI orders arefulfilled according to their aggressiveness relative to theaggressiveness of other orders received by the system 100. That is, anRPI order may be fulfilled prior to a non-RPI order if its respectiveinterest value is greater than that of the non-RPI order irrespective ofits time of entry.

The data source 106 stores an RPI book table 112, an optional auctionbook table 114, an optional continuous book table 115, retail orderrules 116, RPI order rules 118, a participant trading level table 120,and one or more execution priority rules 122. Although the data source106 is shown as being located on, at, or within the server 102, it iscontemplated that the data source 106 can be located remotely from theserver 102 in other aspects of the system 100, such as on, at, or withina database of a data management system or a database of anothercomputing device or system having at least one processor and volatileand/or non-volatile memory. In one embodiment, the data source 106comprises a relational database management system, such as a SQL(Structured Query Language) based database system that provides a frontend for entry and access of data stored therein and provides forreplication for increased reliability and/or mirroring by other sitesthat use the financial exchange system 100.

The communication network 110 can be the Internet, an intranet, oranother wired and/or wireless communication network. In one aspect, oneor more of the server 102 and the computing devices 108 a-108 ncommunicate with one another using any suitable protocol or messagingscheme. For example, the server 102 and computing devices 108 a-108 nmay communicate using a Financial Information Exchange (FIX) protocol ora Binary Order Entry (BOE) protocol, which are protocols commonly usedto exchange financial information. In other aspect, the server 102 andthe computing devices 108 a-108 n exchange data using other protocols(alone or in connection with the FIX protocol and/or the BOE protocol),such as a Hypertext Transfer Protocol (HTTP), extensible markup language(XML), extensible hypertext markup language (XHTML), or a WirelessApplication Protocol (WAP) protocol. Other examples of communicationprotocols exist. Although the example of FIG. 1A shows the server 102communicating with the computing devices 108 a-108 n through the network110, other embodiments contemplate the server 102 communicating directlywith the computing devices 108 a-108 n without the use of a separate anda distinct network. Additionally, other embodiments contemplate that themodules employed by the server 102 and the computing devices 108 a-108 nare integrated in one computing system.

The financial exchange system 100 processes trades using one or morebooks, such as the RPI book table 112, the auction book table 114,and/or the continuous book table 115 shown herein. A book generallyincludes information identifying bids to buy and offers to sellfinancial instruments at the financial exchange system 100 that areeligible for execution, but that have not executed. Un-executed shareson the financial exchange system's book may be referred to herein asresting shares. The financial exchange system 100 may, for example,include a continuous book for bids to buy and offers to sell one or morefinancial instruments at the exchange during regular trading hours, anauction book for bids to buy and offers to sell a financial instrumentat the exchange during an auction (for example, an opening auction, aclosing auction, an IPO auction, or another auction), an extendedtrading hours book for bids to buy and offers to sell a financialinstrument at the exchange before and/or after regular trading hours,and/or another book for bids to buy and offers to sell a financialinstrument at other times and/or at another exchange. In one aspect, thefinancial exchange system 100 has an order book for orders of RPI andnon-RPI trades. Such an order book may be separate or part of acontinuous book or other book. The financial exchange alternately mayhave a continuous book for continuous orders (e.g. orders received forregular trading hours), an auction book for auction orders (ordersreceived for an auction, for example, an opening auction, a closingauction, an IPO auction, or another auction), an order book forRPI-based trades, an extended trading book for orders for executionbefore and/or after regular trading hours, another book for otherorders, or a book combining one or more of the foregoing. Data for oneor more of the books may be stored in a database or other memory. Thedatabase may be stored in the data source 106.

The RPI book table 112 includes RPI records for one or more RPI-basedfinancial instrument orders submitted for trading. The financialexchange system 100 may have one RPI book or multiple RPI books.

The auction book table 114 includes auction records for one or morefinancial instrument orders submitted for trading at one or moreauctions, such as an opening auction, a closing auction, an IPO, or ahalt. For example, the auction book table 114 includes records fororders for opening auctions, closing auctions, and IPO and haltauctions. The financial exchange system 100 may have one auction bookfor one or more auctions or multiple auction books, such as an auctionbook for each auction.

The continuous book table 115 includes records for one or more financialinstrument orders submitted for regular market day trading. For example,the continuous book table 115 may have records for market orders, limitorders, good til canceled orders, and other types of regular trading dayorders.

Referring now to FIG. ID, an order transaction table of the RPI booktable 112 shows order detail data for example RPI orders for aparticular financial instrument that is received by the application 108.The RPI book table 112 includes an order number column 170, an entrytime column 172, a buy shares column 174, a sell shares column 176, anorder type column 178, an offset column 180, and a floor/ceiling column182. The order transaction table may be for a financial instrument orfurther include a symbol or other identification for one or morefinancial instruments. The order number column 170 of FIG. ID showsthree RPI orders, each having a sequential order number. The entry timecolumn 172 shows the time each order was received at the application108. The buy share column 174 shows a quantity of buy shares, if any,requested by each order. The sell share column 176 shows a quantity ofsell shares, if any, requested by each order. The order type column 178shows the order type for each order, e.g., RPI order type. The offsetcolumn 180 shows an offset for each order, e.g., a minimum priceimprovement value, and the floor/ceiling column 182 shows one of a floorprice and a ceiling price for the order.

The RPI orders shown in FIG. ID also may be aggregated and stored in theRPI book table or a consolidated book table. A consolidated book tableincludes one or more types of orders for a financial instrument andinformation associated with the one or more types of orders. As anexample, the orders may include RPI orders, auction orders, continuousmarket trading orders, and other types of orders. The consolidated booktable may include other columns and/or take other forms than a table.The aggregated quantities of particular types of orders in theconsolidated book table may be ordered according to a particular value,e.g., from a highest price level to the lowest price level.

FIG. 2 illustrates example message format data for an order 200 that isstructured according to a financial information exchange (FIX) protocolaccording to an example embodiment. The message format data for an order200 includes various tags and corresponding fields in the FIX format.Other orders formatted according to the FIX protocol may includeadditional tags that are not shown in FIG. 2. In this example, the order200 includes an order type tag 40 corresponds to a type of the financialorder, an order side tag 54 corresponds to an order side, an instrumenttag 55 corresponds to the instrument ID, and an MPID tag 49 maycorrespond to a market participant identification (MPID) associated withthe participant. The particular order shown conforms to a formatspecified by the FIX protocol, which is a protocol commonly used toexchange financial information. RPI orders may include additional tagsand the use of the tags that are not shown in FIG. 2. In otherembodiments, the financial exchange system 100 may process orders thatconform to any suitable protocol of information interchange.

Retail orders and RPI orders may be generated according to valuesassigned to certain tags of an order, such as shown in FIG. 2. Forexample, a retail order includes an order type tag 40 set to the value“retail” and may also include a “type 1” or “type 2” appendix toindicate that the order is either a type 1 retail order or a type 2retail order, respectively. As another example, an RPI order includes anorder type tag 40 with a value of “RPI ORDER” indicating that the orderis an RPI order. The RPI order also includes an order side tag 54indicating whether the RPI is a buy or sale order, an offset tag 24indicating an amount of retail price improvement to be applied to theprotected NBBO of an underlying security associated with the RPI order,and a floor/ceiling tag 25 indicating a limit price above/below whichthe participant does not wish to trade.

Participants use computing devices 108 a-108 n to view RPI data, auctiondata, and place orders (e.g., buy orders and/or sell orders). Forexample, the application 104 periodically (e.g., at 5 second intervals)transmits auction data to certain remote computing devices 108 a-108 nfor display to the user. The transmitted auction data enables the userto view auction data related to one or more financial instruments, suchas securities, and other financial instruments. Such auction dataincludes a transmission time of the auction data, financial instrumentidentification information (e.g., ticker symbol), an auction type, areference price, a reference price range, reference buy shares,reference sell shares, an indicative price, and an auction only price.According to one aspect, the reference price is based on a protected NBBor a protected NBO, for example, a financial exchange BBO or a nationalBBO. Upon his or her discretion, the user may then issue a commandthrough the user interface of the computing device to generate an orderfor buying or selling a desired financial instrument.

According to one aspect, orders received and processed by the system 100include retail orders, retail price improvement (RPI) orders, or anycombination thereof RPI orders may be buy orders or sell orders. An RPIorder generally refers to one that includes displayed or non-displayedinterest on the exchange system that is more aggressive than theprotected national best bid (NBB) or protected national best offer (NBO)by at least a specified minimum price improvement value. In a particularembodiment, the non-displayed interest that is $0,001 greater than theprotected NBB or protected NBO for buy orders, and $0,001 less than theprotected NBB or protected NBO for sell orders.

The Protected NBB is defined as the best-priced protected bid and theprotected NBO is the best-priced protected offer. Generally, theprotected NBB, the protected NBO, the national best bid (NBB), and anational best offer (NBO), together with a NBB, a national best bid oroffer (NBBO) will be the same. However, a market center is not requiredto route to the NBB or NBO if that market center is subject to anexception under regulation rale 611(b)(1) of the National Market System(NMS) regulations, or if such NBB or NBO is otherwise not available foran automatic execution. In such case, the protected NBB or protected NBOwould be the best-priced protected bid or offer to which a market centermust route interest pursuant to rale 611 of the NMS regulations.

The financial exchange system 100 may be any system configured toadminister the purchase and sale of securities. In various embodiments,the application 104 prevents retail orders (e.g., non-RPI orders) frominteracting with RPI orders if the RPI order is not priced a minimumvalue more aggressive than the Protected NBBO. However, RPI orders moreaggressive than the minimum price improvement value could be placed. Foran example where the minimum specified price improvement value is$0,001, a RPI order may be placed having a price improvement valuegreater than $0,001, including $0,015 better than the protected NBBO. Inone embodiment, the application 104 accepts RPI orders without a minimumprice improvement value and an interest executes at its floor or ceilingprice when such floor or ceiling price is better than the protected NBBOby the specified minimum price improvement value or more.

The price of an RPI order is determined by the following information:(1) RPI buy or sell interest; (2) an offset, if any; and (3) a ceilingor floor price. In many cases, the RPI sell or buy interest typicallytracks the Protected NBBO. The offset comprises a predetermined amountby which the participant is willing to improve the Protected NBBO,subject to a ceiling or floor price. The ceiling or floor pricecomprises the amount above or below which the participant does not wishto trade. In one embodiment, RPI orders in their entirety (the buy orsell interest, the offset, and the ceiling or floor) will remainnon-displayed. The application 104 further allows participants to enterRPI orders which establish the exact limit price, which is similar to anon-displayed limit order currently accepted by conventional exchangesystem except that the application 104 will accept customized amounts,such as sub-penny limit prices on RPI orders with three decimal places.The exchange system monitors whether a RPI buy or sell interest,adjusted by any offset and subject to the ceiling or floor price, iseligible to interact with incoming retail orders.

FIG. IB depicts an example embodiment of one of the one or more acomputing devices 108 a-108 n according to one aspect of the financialexchange system 100. The computing device 108 a is a computing orprocessing device that includes one or more processors 130 and memory132 to receive data and/or communications from, and/or transmit dataand/or communications to, the server 102 via the communication network110. The computing device 108 a includes a display 134, such as acomputer monitor, for displaying data and/or a graphical user interface138. The computing device 108 a may also include an input device 140,such as a keyboard or a pointing device (e.g., a mouse, trackball, pen,or touch screen) to enter data into or interact with the graphical userinterface 138. In one embodiment, the display 134 comprises atouchscreen device receiving input provided via physical contact by theuser with the touchscreen device, e.g., contact by a finger of the userwith the touchscreen device.

The computing device 108 a may also include a graphical user interface(or GUI) application 142, such as a browser application, or applicationsoftware (e.g., a mobile app) comprising instructions stored in thememory 132 and executed by the processor 130 to generate a graphicaluser interface 138 to the display 134. The graphical user interface 138enables a user of the computing device 108 a to interact with the GUIapplication 142 to entering orders for purchase or sale of one or moresecurities and communicate with the server 102. The computing device 108a transmits data and messages to the server 102 and receives data andmessages from the server 102. The GUI application 142 displays data andmessages received from the server 102 and provides a mechanism fortransmitting data and messages to the server 102. The computing device108 a may communicate via wireless and/or wireline communications.

FIG. 3 shows a block diagram of the RPI financial exchange server 102with the RPI financial exchange application 104 according to an exampleembodiment. According to one aspect, the server 102 includes a processor302 that includes one or more processors or other processing devices.The processor 302 is hardware. The processor 302 executes the RPIfinancial exchange application 104 to process financial interest orderdetail data received from one or more orders, which is recorded in anRPI book table 112 and/or an optional auction book table 114 and/or anoptional continuous book table 115 to fulfill orders. In this context,the process of fulfilling orders refers to matching one or more buyorders with one or more sell orders and notifying parties to a trade formatched orders. Fulfilling optionally may include administrating orfacilitating the transferal of the underlying financial instrument andmonetary consideration associated with the orders between the interestedparticipants.

In the particular embodiment shown, the computer readable medium 304stores the financial exchange application 104, the RPI book table, 112,optionally the auction book table 114, and optionally the continuousbook table 115. The RPI financial exchange application 104 includesinstructions or modules that are executable by the processor 302 tomatch orders.

The computer readable medium 304 may include volatile media, nonvolatilemedia, removable media, non-removable media, and/or another availablemedium that can be accessed by the server 102. By way of example and notlimitation, computer readable medium 304 comprises computer storagemedia and communication media. The computer storage medium includesnon-transient storage memory, volatile media, nonvolatile media,removable media, and/or non-removable media implemented in a method ortechnology for storage of information, such as computer readableinstructions, data structures, program modules, or other data.Communication media may embody computer readable instructions, datastructures, program modules, or other data and include an informationdelivery media or system.

A GUI module 306 receives data as user input and communicates this dataand/or other communications between the server 102 and the participantcomputing devices 108 a-108 n. In one example, one participant computingdevice 108 a transmits an access request to the application 104 on theserver 102 via the GUI module 306, for example, by entering order datafor one or more orders via that computing device 108 a. The GUI module306 is further configured to transmit RPI and auction data that mayinclude fulfilled orders and/or unfulfilled orders for display on thecomputing device 108 a.

An order processing module 308 receives an order from a computing device(e.g., participant computing device 108 a-108 n) or other computingdevice. As described above, the computing device 108 a transmits anorder in, for example, a FIX message format or other suitable format.The order processing module 308 identifies order detail data included inthe received order. For example, the order processing module 308processes the order to determine whether the order is one of a retailorder or an RPI order. The order processing module 308 then optionallystores the order detail data in the data source 106.

A retail order eligibility module 310 retrieves retail order rules 116from the data source 106 and processes the order detail data accordingto the rules to determine if the order is eligible for retailprocessing. Retail order rules 116 specify whether orders are eligiblefor retail processing based on order type and/or a time that the orderis received by the application 104. For example, the retail order rulesspecify that only participants classified in a certain participanttrading level (e.g., a member trading level) may submit retail orders.As another example, the application 104 uses the retail order rules 116to ensure that each retail order or an ongoing group of retail ordersmeets certain criteria. For example, retail orders may refer to anagency order that originates from a natural person and is submitted tothe exchange by a member participant, provided that no change is made tothe terms of the order with respect to price or side of market and theorder does not originate from a trading algorithm or any othercomputerized methodology.

In one embodiment, market participants could qualify for membership ifthey conduct a retail business or handle retail orders on behalf ofanother broker-dealer. To qualify, the participant wishing to obtainmember status submits several elements of information, such as anapplication form, an attestation in a form prescribed by the exchangeorganization that any order submitted by the participant as a retailorder would meet the qualifications for such orders under proposed Rule11.24 of the NMS regulations, and/or supporting documentation sufficientto demonstrate the retail nature and characteristics of the applicant'sorder flow. For example, a prospective member participant providessample marketing literature, website screenshots, other publiclydisclosed materials describing the retail nature of their order flow,and such other documentation and information as the exchangeorganization may require providing reasonable assurance that theapplicant's order flow would meet the requirements of the retail orderdefinition.

Additionally, if the participants are accepted as member participants,they may be required to have written policies and procedures reasonablydesigned to assure that it will only designate orders as retail ordersif all requirements of a retail order are met. Such written policies andprocedures may require the member to: (i) exercise due diligence beforeentering a retail order to assure that entry as a retail order is incompliance with the requirements of this rale, and (ii) monitor whetherorders entered as retail orders meet the applicable requirements. If themember participant represents retail orders from another broker-dealercustomer, the member participant's supervisory procedures must bereasonably designed to assure that the orders received from suchbroker-dealer customer that it designates as retail orders meet thedefinition of a retail order. The member participant may (i) obtain anannual written representation, in a form acceptable to the exchangeorganization, from each broker-dealer customer that sends it orders tobe designated as retail orders that entry of such orders as retailorders will be in compliance with the requirements of this rale, and(ii) monitor whether its broker-dealer customer's retail order flowcontinues to meet the applicable requirements. The exchange organizationor another self-regulatory organization on behalf of the exchangeorganization reviews member participants' compliance with theserequirements through an exam-based review of each member participant'sinternal controls.

Although any member may request member status, the member status may bedisapproved by the exchange organization. In the event that the exchangeorganization disapproves the application, the exchange organizationprovides a written notice to the member participant. The disapprovedapplicant may appeal the disapproval by the exchange organization usingany suitable procedure. For example, the member participant may appealthe disapproval as provided in specified in rale 11.24(d) of theNational Market System (NMS) regulations, and/or reapply for memberstatus at a specified period of time (e.g., 90 days) after thedisapproval notice is issued by the exchange organization. Additionally,a member participant also could voluntarily withdraw from such status atany time by giving written notice to the exchange organization.

Decisions to approve participants for member status may be made by a RPIpanel. The RPI panel may include the exchange organization's ChiefRegulatory Officer (CRO), or a designee of the CRO, and two officers ofthe exchange organization designated by the Chief Operating Officer(COO). The RPI Panel reviews the facts and renders a decision within thetime frame prescribed by the exchange organization. The RPI Panel mayoverturn or modify an action taken by the exchange organization and alldeterminations by the RPI Panel constitute final action by the exchangeorganization on the matter at issue.

Member participants are required to abide by certain tradingrequirements, such as those specified in Rule 11.24(c) in the NMSregulations. If a member participant designates orders submitted to theexchange system as retail orders and the exchange organizationdetermines, in its sole discretion, that those orders fail to meet anyof the requirements of retail orders, the exchange organization maydisqualify a member from its status as a member participant. Whendisqualification determinations are made, the exchange organizationprovides a written disqualification notice to the member. A disqualifiedmember participant may appeal the disqualification as provided in Rule11.24(d) of the NMS regulations and/or reapply for member status at aspecified period of time (e.g., 90 days) after the disqualificationnotice is issued by the exchange organization. According to one aspect,the auction eligibility module 310 stores a participant trading leveltable 120 that indicates for participants and an order trading levelclassification. Using this table, the retail order eligibility module310 determines whether the participant may enter retail orders, and/orsubmit RPI orders having a minimum margin for member participants.

Information associated with the qualifications for member participantsdescribed above are stored in the retail order rales 116 and accessed bythe retail order eligibility module 310 to verify compliance of memberparticipants to these rales when retail order are submitted to thesystem 100.

An RPI order eligibility module 312 retrieves RPI order rales 118 fromthe data source 106 and processes the RPI order detail data according tothe rales to determine if the RPI order is eligible for RPI processing.RPI order rales 118 specify whether orders are eligible for RPIprocessing based on one or more criteria associated with RPI orders. Forexample, the RPI order eligibility module 312 determines whether theoffset value associated with the RPI order meets a minimum margin (e.g.,a spread) that is more aggressive than the protected NBB or NBO of theunderlying financial instrument.

All exchange participants (e.g., member participants and non-memberparticipants) may be permitted to submit RPI orders for contra-sideretail orders that are each better than the national best bid that is aProtected Quotation (“Protected NBB”) or the national best offer that isa Protected Quotation (“Protected NBO”, and together with the ProtectedNBB, the “Protected NBBO”). However, a member participant may generateRPI orders having a lower minimum price improvement value than otherclasses of investors. In one embodiment, submitted RPI orders may benon-displayed. That is, the bid or offer price of the RPI order is notopen for public inspection until or unless the order is consummated withcontra-side interest.

As another example, the RPI order eligibility module 312 rejects RPIorders when the protected NBB or the protected NBO of the underlyingsecurity is less than a specified value. Although all securities tradedon the exchange system may be implemented with RPI orders, the RPIorders are limited to those securities having a certain specified price(e.g., $1.00 per share). Toward that end, the RPI eligibility module 312prevents the interaction of an RPI buy or sell interest (adjusted by anyoffset) and retail orders at a price below $1.00 per share. As discussedabove, the price of an RPI order would be determined by a participant'sentry of buy or sell interest, an offset (if any) and a ceiling or floorprice.

In addition to facilitating an orderly and operationally intuitivetrading platform, limiting RPI orders to securities equal to or greaterthan $1.00 per share may enable the exchange organization to focus itsefforts on monitoring price competition and to assess any indicationsthat data disseminated under the Program is potentially disadvantagingretail orders. Given this limitation, RPI orders may exhibit reducedimpact on the minimum pricing increment for orders priced less than$1.00 and therefore no effect on the potential of markets executingthose orders to lock or cross. In addition, the non-displayed nature ofthe liquidity in the underlying securities has no potential to disruptdisplayed, protected quotes. In any event, auctions implementing RPIorders would not unduly affect the obligation of exchanges to avoid andreconcile locked and crossed markets under Rule 610(d) of the NMSregulations.

A RPI order incentive module 314 generates one or more incentives, suchas monetary incentives to promote the use of RPI orders by theparticipants. The RPI order incentive module 314 retrieves RPI orderrales 118 from the data source 106 and uses the RPI order rales 118 toevaluate concurrently placed RPI orders. For example, the RPI orderincentive module 314 charges participants a fee for executions of RPIorders against retail orders (e.g., non-RPI order) and in turn providesa credit or free executions to member participants for executions oftheir retail orders against RPI orders. As explained above, theapplication 104 executes incoming retail orders against all availablecontra-side orders provide price improvement to the retail order,including non-displayed orders other than RPI orders. In the event anon-displayed interest other than an RPI order interacts with a retailorder, the RPI incentive module 314 charges the participant that enteredsuch non-displayed interest the same fee as is imposed for an RPI orderexecution. In such cases, the fee charged to the participant thatentered the non-displayed interest will likely be greater than the feecharged that same participant for an execution against a non-RPI order.

The order execution module 316 fulfills one or more buy orders with oneor more sell orders at an RPI execution price. The order executionmodule 316 uses one or more execution priority rules 122 when fulfillingthe orders. In one embodiment, the order execution module 316 matchesone or more RPI buy/sell orders using a price/time priority model. Theprice/time priority model generally refers to an order matching schemein which at least one RPI order placed for a given security may befulfilled based on the aggressiveness of the interest value of eachorder relative to the interest value of other RPI orders. That is, anRPI order may be fulfilled ahead of other non-RPI orders or RPI orderswhen its interest value is more aggressive than these other orders.

An order execution reporting module 318 publishes information associatedwith the use of RPI orders. Within this context, the term “publish”means to disseminate or otherwise transmit information about tradesconducted with RPI orders for consumption by participants who use thesystem 100 or others who may wish to observe the use of the system 100.For example, the order execution reporting module 318 publishes a retailliquidity identifier that indicates a relative liquidity of securitiestraded using RPI orders. The retail liquidity identifier may bepublished using any suitable communication means. For example,information associated with trades conducted with RPI orders may bepublished pursuant to the Consolidated Tape AssociationPlan/Consolidated Quotation Plan, or CTA/CQ, for Tape A and Tape Bsecurities, and the NASDAQ™ UTP Plan or consolidated public market datastream for Tape C securities. In particular, these outputs may includeone or more fields for codes related to the RPI identifier.

According to another aspect, the server 102 also optionally includes adisplay 320, such as a computer monitor, for displaying data and/or agraphical user interface 322. The server 102 may also optionally includean input device 324, such as a keyboard or a pointing device (e.g., amouse, trackball, pen, or touch screen) to enter data into or interactwith the graphical user interface 322.

It should be appreciated that the modules described herein are providedonly as an example of a computing device that may execute the financialexchange application 104 according to the teachings of the presentdisclosure, and that other computing devices may have the same modules,different modules, additional modules, or fewer modules than thosedescribed herein. For example, one or more modules as described in FIG.3 may be combined into a single module. As another example, certainmodules described herein may be encoded and executed on other computingdevices, such as a computing device 108 a used by a participant.Further, one or more or all of the modules may be stored and executed bythe financial exchange server 102 and data and instructions aretransmitted to and from the financial exchange server 102 and thecomputing devices 108 a-108 n to execute their functions.

FIG. 4 depicts an example process 400 that may be performed by the RPIfinancial exchange application 104 of the RPI financial exchange system100 according to one embodiment of the present disclosure. The RPIfinancial exchange system 100 operates similar to a conventionalelectronic financial exchange in that it provides an electronic exchangefor matching orders of market participants to buy and sell varioussecurities. FIG. 4, more specifically, illustrates an operation of theRPI financial exchange application 104 executing on the processor 302 ofthe RPI financial exchange system 100 for trading securities or otherfinancial interests. The process 400 shown in FIG. 4 begins at step 410.

At step 410, the application 104 receives multiple orders for bids andasks for shares of securities or other financial interests. According toone aspect, the orders include one or more retail orders and one or moreRPI orders. The RPI orders include for example, an interest value, anoptional offset, and a ceiling or floor price that is an amount above orbelow, respectively, which the participant does not wish to trade.

Non-member participants and member participants may enter odd lots,round lots or mixed lots as RPI orders and as retail ordersrespectively. RPI orders are ranked and allocated according to price andtime of entry into the exchange system consistent with exchange rule11.12 of the NMS regulations and therefore without regard to whether thesize entered is an odd lot, round lot or mixed lot amount. Similarly,retail orders will interact with RPI orders according to certainpriority and allocation rules without regard to whether they are oddlots, round lots or mixed lots. Finally, retail orders may be designatedas Type 1 or Type 2 without regard to the size of the order. Inaccordance with rules of the consolidated tape plans, executions lessthan a round lot will not print to the consolidated tape or beconsidered the last sale.

At step 420, the financial exchange system 100 verifies retail ordersagainst the retail order rules 116 stored in the data source 106. Forexample, retail orders may only be submitted by member participants whohave been previously vetted by the exchange. Upon receipt of a retailorder, the application 104 accesses the participant trading level table120 to verify that the participant submitting the retail order isauthorized to submit such an order. As another example, retail ordersmay be constantly monitored to ensure that the retail orders meet thedefinition of retail orders. That is, the application 104 comparesincoming retail orders with the retail order rules 116 stored in thedata source 106 to ensure that the retail orders meet the criteria. Asan example, the application 104 verifies that submitted retail ordersare not used for price-gouging such that speculation is made over thebid/ask spread of the underlying security when RPI orders are used ascontra-side interest.

In one embodiment, retail orders may be submitted as type 1 or type 2retail orders. Type 1 or type 2 orders generally indicate interactionwith available contra-side interests. A type 1 retail order interactswith available contra-side RPI orders and other price improvingliquidity but does not interact with other available contra-sideinterests in the exchange system or route to other markets. The portionof a type 1 retail order that does not execute against contra-side RPIorders or other price improving liquidity would be immediately andautomatically canceled. Alternatively, a Type 2 retail order interactsfirst with available contra-side RPI orders and other price improvingliquidity and then any remaining portion of the retail order would beexecuted as an Immediate or Cancel (IOC) order pursuant to Rule11.9(b)(1) of the NMS specification. A type 2 retail order can either besubmitted as an exchange only order or as an order eligible for routingto other exchanges pursuant to Rule 11.13(a)(2) of the NMS regulations.Accordingly, a type 2 retail order interacts with other interests in theexchange and, if designated as eligible for routing, would route toother markets in compliance with the NMS regulations.

At step 430, the financial exchange system 100 verifies incoming RPIorders against one or more RPI order rules 118 stored in the data source106. For example, the application 104 verifies that RPI orders arelimited to those securities having a protected NBBO price greater than aspecified amount, such as $1.00 per share. For example, if there was anRPI buy order tracking the Protected NBB at $0.99 with an offset of$0,001 and a ceiling of $1.02, the RPI order eligibility module 310prevents the execution of the RPI order at $0,991 with a sell retailorder with a limit of $0.99. However, if the retail order was a Type 2order, the order would be able to interact at $0.99 with liquidityoutside the exchange's order book. Type 2 retail orders are treated asimmediate or cancel (IOC) orders that execute against displayed andnon-displayed liquidity in the exchange's order book where there is noavailable liquidity in the exchange. Type 2 retail orders can either bedesignated as eligible for routing to other exchanges or limited to theexchange administering the system 100 only, and thus non-routable, asdescribed above. As another example, the application 104 verifies thatthe protected NBBO of the security each RPI order does not exceed thefloor or ceiling limit of the RPI order.

At step 440, the application 104 fulfills the orders according to one ormore execution priority rules 122 stored in the data source 106.According to one aspect, the application 104 fulfills the ordersaccording to a price/time priority model. That is, the application 104fulfills RPI orders according to their interest value relative to theinterest values of the other orders irrespective of the time in whichthe orders were entered. The application 104 fulfills the orders basedupon the aggressiveness of their respective interest values relative tothe interest value of any RPI orders. For example, a buy RPI order,although received after a buy non-RPI order, may be fulfilled prior tothe buy non-RPI order if the buy RPI order has an interest value greaterthan that of the non-RPI order. Conversely, a sell RPI order, althoughreceived after another sell non-RPI order, may be fulfilled prior to thesell non-RPI order if the buy RPI order has an interest value less thanthat of the sell non-RPI order.

RPI orders may interact with retail orders as follows. Assume aparticipant enters an RPI sell order with an offset of $0,001 and afloor (e.g., lower limit) of $10.10 while the Protected NBO is $10.11.The RPI order could interact with an incoming buy retail order at$10,109. If, however, the Protected NBO was $10.10, the RPI order couldnot interact with the retail order because the price required to deliverthe minimum $0,001 price improvement ($10,099) would violate theparticipant's floor (e.g., lower limit) of $10.10. If a participantotherwise enters an offset greater than the minimum required priceimprovement and the offset would produce a price that would violate theParticipant's floor, the offset would be applied only to the extent thatit respects the floor value of the RPI order.

By way of illustration, an example RPI buy interest is entered with anoffset of $0,005 and a ceiling (e.g. upper limit) of $10,112 while theProtected NBB is at $10.11. The RPI order could interact with anincoming sell retail order at $10,112, because the order produces therequired price improvement without violating the ceiling value of theRPI order, but could not interact above the $10,112 ceiling. Finally, ifan RPI order is entered without an offset (e.g., an explicitly pricedlimit order), the RPI order interacts with retail orders at the level ofthe participant's limit price as long as the minimum required priceimprovement is produced. Accordingly, if RPI sell interest is enteredwith a limit price of $10,098 and no offset while the Protected NBO is$10.11, the RPI order could interact with the retail order at $10,098,producing $0,012 of price improvement. The application 104 will notcancel RPI interest when it is not eligible to interact with incomingretail orders. Rather, such RPI interest remains in the exchange systemand may become eligible again to interact with other retail ordersdepending on the Protected NBB or Protected NBO.

In various embodiments, RPI orders received by the application 104 areranked and allocated according to price and then to time of entry intothe exchange system. That is, the exchange system fulfills RPI orders ina price/time priority model. Any remaining unexecuted RPI interestremains available to interact with other incoming retail orders if suchinterest is at an eligible price. As an example in which a protected NBOfor a particular security ranges from $10.00 to $10.05, a first RPIorder is entered to buy the security at $10,015 for 500, a second RPIorder is entered to buy ABC at $10.02 for 500, and a third RPI order isentered to buy ABC at $10,035 for 500. An incoming retail order to sellthe security for 1,000 executes first against the third RPI order's bidfor 500 at $10,035, because it is the best priced bid, then against thesecond RPI order's bid for 500 at $10.02, because it is the next bestpriced bid. The first RPI order is not filled because the entire size ofthe retail order to sell 1,000 is depleted. Thus, the retail orderexecutes against RPI orders according to the price/time priority model.

However, assume the same facts above, except that the second RPI orderto buy the security at $10.02 is for 100. The incoming retail order tosell 1,000 executes first against the third RPI order's bid for 500 at$10,035, because it is the best priced bid, then against the second RPIorder's bid for 100 at $10.02, because it is the next best priced bid.The first RPI order then receives an execution for 400 of its bid for500 at $10,015, at which point the entire size of the retail order tosell 1,000 is depleted.

As another example, assume the same facts as above, except that thethird order was not an RPI order to buy ABC at $10,035; but rather, anon-displayed order to buy ABC at $10.03. The result would be similar tothe result immediately above, in that the incoming retail order to sell1,000 executes first against the third order's bid for 500 at $10.03,because it is the best priced bid, then against the second RPI order'sbid for 100 at $10.02, because it is the next best priced bid. The firstRPI order then receives an execution for 400 of its bid for 500 at$10,015, at which point the entire size of the retail order to sell1,000 is depleted.

At step 450, the application 104 publishes information associated withthe use of RPI orders. According to one aspect, the exchangeorganization produces ongoing data associated with the use of RPIorders, which may include statistics about participation, the frequencyand level of price improvement provided by the RPI orders, and anyeffects on the broader market structure.

According to one aspect, the application 104 publishes information, suchas a retail liquidity identifier when RPI interest is priced moreaggressively than the minimum price improvement value is better than theexchange's Protected Bid or Protected Offer for a particular security isavailable in the exchange system. The retail liquidity identifier may bepublished through consolidated data streams as well as throughproprietary exchange data feeds. For example, the retail liquidityidentifier may be published pursuant to the Consolidated TapeAssociation Plan/Consolidated Quotation Plan, or CTA/CQ, for Tape A andTape B securities, and the NASDAQ™ UTP Plan or consolidated publicmarket data stream for Tape C securities. The retail liquidityidentifier may reflect the symbol and the side (buy or sell) of the RPIorders, but may not necessarily include the price or size of the RPIorders. In particular, CQ and UTP quoting outputs may include a fieldfor codes related to the retail Price Improvement Identifier. The codesmay indicate RPI orders that are priced better than the exchange'sProtected Bid or Protected Offer by at least the minimum level of priceimprovement.

FIG. 6 depicts another exemplary financial exchange computing system 600that includes the RPI financial exchange system (RES) 102 in accordancewith example embodiments. The RES 102 includes a server (local server)602 or other computer or computing device or system that includes an RPIapplication 604 and a data source 606. A server, a computer, a computerdevice, and a computing device are examples of computing hardware. Aprocessor is another example of hardware. Hardware is a physical device.

The RES 102 receives one or more orders, order information, and/or otherdata and/or communications from one or more remote computing devices(remote device) (e.g., remote device #1-#N) 608 or other computersystems or devices via a communication network 110. The RES 102transmits order information (such as information for executed orders,reward or other incentive data, or payment information) and/or otherdata and/or communications to the computing devices (e.g., remote device#1-#N) 608 or other computer systems or devices via the communicationnetwork 610.

The RES 102 transmits orders, order information, market data, incentivedata, and/or other data and/or communications to a Security InformationProcessor (SIP) system 132 and receives orders, order information,market data, incentive data, and/or other data and/or communicationsfrom the SIP system.

The local server 602 is associated with a financial exchange, such as alocal financial exchange, and is configured to receive orders, orderdata, incentive data, and/or other data and/or communications fromand/or transmit orders, order data, incentive data, and/or other dataand/or communications to the one or more remote devices 608 through acommunication network 610. The local server 602 includes one or moreprocessors and volatile and/or non-volatile memory and executes the RPIapplication 604, such as to process RPI-based orders. Examples of alocal server 602 include one or more servers, personal computers, mobilecomputers and/or other mobile devices, and other computing devices. Thelocal server 602 communicates via wireless and/or wirelinecommunications.

The local server 602 receives data and/or communications from and/ortransmits data and/or communications to the SIP system 632, such asdirectly or through a communication network.

According to one aspect, the local server 602 includes a clientcommunication interface (not shown). The client interface provides aport for one or more remote devices 608 to enable point-to-pointcommunications between the local server 602 and a particular remotedevice 608 connected to that port or point-to-multipoint communicationsbetween the server and multiple remote devices connected to one or moreports. As a result, each of the multiple remote devices 608 can beconnected to the client interface via a different port in oneembodiment. The port optionally may be a dedicated port.

Optionally, the local server 602, or the RPI application 604 executingon the local server 602, periodically stores and/or aggregates orders,order data, market data, incentive data, and/or other data. The localserver 602, for example, receives consolidated BBO informationidentifying a BBO, receives raw order data from which it calculates aBBO, and/or uses order information for financial instruments executingon an exchange from which it calculates a BBO (alone or in combinationwith other data). The local server 602 optionally stores order data fororders displayed to and/or executed on the exchange in an exchange bookand optionally stores BBO information and/or other market data, forexample, in a consolidated book table.

The data source 606 stores order information (data), market information(data), incentive information (data), and/or other data. For example,according to one aspect, the data source 606 stores order detail data(described below) for each order received at the local server 602 fromthe one or more remote devices 608. The data source 606 may also storeorder data, market data, incentive data, and other data received fromthe SIP system 632.

Although the data source 606 is shown as being located on, at, or withinthe local server 602, it is contemplated that the data source 606 can belocated remotely from the local server 602 in other aspects of the RES102, such as on, at, or within a database of another computing device orsystem having at least one processor and volatile and/or non-volatilememory.

The remote devices 608 each have one or more processors and volatileand/or non-volatile memory. Examples of a remote device 608 include oneor more personal computers, mobile computers and/or other mobiledevices, and other computing devices. The remote devices 608 eachcommunicate via wireless and/or wireline communications.

The remote servers 634 each have one or more processors and volatileand/or non-volatile memory. Examples of a remote server include one ormore servers, personal computers, mobile computers, and/or other mobiledevices, and other computing devices. The remote servers 634 eachcommunicate via wireless and/or wireline communications.

The SIP system 632 transmits orders, order information, market data,incentive data, and/or other data to one or more remote exchange servers(e.g., remote servers #1-#N 634) via a communication network 636 and/orto the local server 602. The SIP system 632 also receives orders, orderinformation, incentive data, market data, and/or other data from one ormore remote exchange servers (e.g., remote servers #1-#N 634) via thecommunication network and/or to the local server 602.

The communication networks 610, 636 can be can be the internet, anintranet, and/or another wired and/or wireless communication network. Inone aspect, one or more of the local server 602, the remote devices 608,the remote server 634, and/or the SIP system 632 communicate data inpackets, messages, or other communications using a Financial InformationExchange (FIX) protocol, which is a protocol commonly used to exchangefinancial information. In another aspect, one or more of the localserver 602, the remote devices 608, the remote servers 634, and/or theSIP system 632 exchange data using other protocols (alone or inconnection with the FIX protocol), such as a Hypertext Transfer Protocol(HTTP) or a Wireless Application Protocol (WAP). Other examples ofcommunication protocols exist.

FIG. 5 illustrates an example general purpose computer 500 that may beuseful in implementing the described technology, such as the financialexchange application 104 executed by the processor 302 of the financialexchange server 102. The example hardware and operating environment ofFIG. 5 for implementing the financial exchange server 102 and financialexchange application 104 executed by the processor 302 appropriatecounterparts include various computing devices, such as general purposecomputing devices in the form of personal computers, servers, or othertypes of computing devices. As shown in FIG. 5, for example, the generalpurpose computer 500 includes a processor 510, a cache 560, a systemmemory 570, 580, and a system bus 590 that operatively couples varioussystem components including the cache 560 and the system memory 570, 580to the processor 510. The general purpose computer 500 may include oneor more than one processors 510, such that the processor of generalpurpose computer 500 comprises a single central processing unit (CPU),or a plurality of processing units, commonly referred to as a parallelprocessing environment. The general purpose computer 500 may be aconventional computer, a distributed computer, or any other type ofcomputer.

The system bus 590 may be any of several types of bus structuresincluding a memory bus or memory controller, a peripheral bus, aswitched fabric, point-to-point connections, and a local bus using anyof a variety of bus architectures. The system memory may also bereferred to as simply the memory, and includes read only memory (ROM)570 and random access memory (RAM) 580. A basic input/output system(BIOS) 572, containing the basic routines that help to transferinformation between elements within the storage system 200 such asduring start-up, is stored in ROM 570. The general purpose computer 500further includes a hard drive 520 such as a hard disk drive or solidstate disk drive, for reading from and writing to a persistent memorysuch as a hard disk, not shown and an optical disk drive 530 for readingfrom or writing to a removable optical disk such as a CD ROM, DVD, orother optical media.

The hard disk drive 520 and optical disk drive 530 are connected to thesystem bus 590. The drives and their associated computer-readable mediaprovide nonvolatile storage of computer-readable instructions, datastructures, program engines, and other data for the general purposecomputer 500. It should be appreciated by those skilled in the art thatany type of computer-readable media which can store data that isaccessible by a computer, such as magnetic cassettes, flash memorycards, digital video disks, random access memories (RAMs), read onlymemories (ROMs), and the like, may be used in the example operatingenvironment.

A number of program engines may be stored on the hard disk, opticaldisk, ROM 570, or RAM 580, including an operating system 582 and one ormore application programs 584. A user may enter commands and informationinto general purpose computer 500 through input devices such as akeyboard and pointing device connected to the USB or Serial Port 540.These and other input devices are often connected to the processor 510through the USB or serial port interface 540 that is coupled to thesystem bus 590, but may be connected by other interfaces, such as aparallel port. A monitor or other type of display device may also beconnected to the system bus 590 via an interface, such as a videoadapter 560. In addition to the monitor, computers typically includeother peripheral output devices (not shown), such as speakers andprinters.

The general purpose computer 500 may operate in a networked environmentusing logical connections to one or more remote computers. These logicalconnections are achieved by a network interface 550 coupled to or a partof the general purpose computer 500; the embodiments are not limited toa particular type of communications device. The remote computer may beanother computer, a server, a router, a network PC, a client, a peerdevice, or other common network node, and typically includes many or allof the elements described above relative to the general purpose computer500. The logical connections include a local-area network (LAN) awide-area network (WAN), or any other network. Such networkingenvironments are commonplace in office networks, enterprise-widecomputer networks, intranets and the Internet, which are all types ofnetworks.

The network interface 550, which may be internal or external, isconnected to the system bus 590. In a networked environment, programsdepicted relative to the general purpose computer 500, or portionsthereof, may be stored in the remote memory storage device. It isappreciated that the network connections shown are example and othermeans of and communications devices for establishing a communicationslink between the computers may be used.

The foregoing merely illustrates the principles of the disclosure.Various modifications and alterations to the described embodiments willbe apparent to those skilled in the art in view of the teachings herein.It will thus be appreciated that those skilled in the art will be ableto devise numerous systems, arrangements and methods which, although notexplicitly shown or described herein, embody the principles of thedisclosure and are thus within the spirit and scope of the presentdisclosure. From the above description and drawings, it will beunderstood by those of ordinary skill in the art that the particularembodiments shown and described are for purposes of illustrations onlyand are not intended to limit the scope of the present disclosure.References to details of particular embodiments are not intended tolimit the scope of the disclosure.

What is claimed is:
 1. An exchange order fulfillment method comprising:receiving, by at least one processor of an electronic exchange, aplurality of electronic communications from participant computingdevices via a communication network, each of the participant computingdevices in communication with a particular port provided by theelectronic exchange, the communications comprising orders for trades ofone or more financial instruments in a message format comprising one ormore tags and associated with a message protocol, at least one of theorders from one of the participant computing devices comprising aplurality of tags identifying a financial instrument for a trade, anorder side, and an amount of price improvement to be applied to one of aprotected national best bid (NBB) or a protected national best offer(NBO) of the financial instrument for the trade; fulfilling, by the atleast one processor, the at least one order when the amount of the priceimprovement is more aggressive than a specified value of aggressivenessrelative to the one of the protected NBB or the protected NBO of thefinancial instrument; and reporting information associated withfulfillment of the at least one order to at least one of the participantcomputing devices in the message format using the particular port or toa consolidated data stream at a particular interval of time for displayon a user interface of the one of the participant computing devices. 2.The exchange order fulfillment method of claim 1, wherein the at leastone order comprises a buy order having an interest value that is greaterthan the protected NBO.
 3. The exchange order fulfillment method ofclaim 1, wherein the at least one order comprises a sell order having aninterest value that is less than the protected NBB.
 4. The exchangeorder fulfillment method of claim 1, further comprising receiving aplurality of the orders from at least one participant computing devicefor a participant classified in at least two participant trading levels.5. The exchange order fulfillment method of claim 4, further comprisingrejecting the at least one order when the amount of price improvement ofthe at least one order is less aggressive than the specified value ofaggressiveness of the one of the protected NBB or the protected NBO, thespecified value of aggressiveness for each of the at least twoparticipant trading levels being different from one another.
 6. Theexchange order fulfillment method of claim 5, wherein the participanttrading levels comprise a member trading level and a non-member tradinglevel.
 7. The exchange order fulfillment method of claim 6, wherein themember trading level has a first amount of price improvement that isless than a second amount of price improvement of the non-member tradinglevel.
 8. The exchange order fulfillment method of claim 5, furthercomprising accepting orders from participant computing devices forparticipants classified at a specified participant trading level.
 9. Theexchange order fulfillment method of claim 1, further comprisingrejecting the at least one order when the amount of price improvement ofthe at least one order is less aggressive than the specified value ofaggressiveness of the one of the protected NBB or the protected NBO. 10.The exchange order fulfillment method of claim 1, wherein a participantis charged a fee for placing a price improvement order against anon-price improvement order and is provided with a monetary credit forplacing the non-price improvement order against the price improvementorder.
 11. The exchange order fulfillment method of claim 1, furthercomprising publishing a liquidity identifier identifying a symbol and abuy or sell side of the at least one order.
 12. The exchange orderfulfillment method of claim 1, wherein the at least one order is notopen for public inspection unless the at least one order is consummatedwith a contra-side interest.
 13. The exchange order fulfillment methodof claim 1, further comprising allowing a retail order to interact withorders other than the at least one order.
 14. The exchange orderfulfillment method of claim 1, further comprising inhibiting a retailorder from interacting with orders other than the at least one order.15. The exchange order fulfillment method of claim 1, further comprisingreceiving the plurality of electronic communications in the messageformat associated with the message protocol, wherein the messageprotocol comprises at least one of Financial Information Exchangeprotocol (FIX) protocol and Binary Order Entry (BOE) protocol.
 16. Theexchange order fulfillment method of claim 1, further comprising:determining, by the at least one processor, values assigned to theplurality of tags of the at least one order; and based on the values ofthe plurality of tags, fulfilling the at least one order when the amountof the price improvement is more aggressive than the specified value ofaggressiveness relative to the one of the protected NBB or the protectedNBO of the financial instrument.
 17. The exchange order fulfillmentmethod of claim 1, wherein the at least one order comprises a tagidentifying the at least one order as a price improvement order type.18. The exchange order fulfillment method of claim 1, wherein the atleast one order identifies a ceiling price above which the trade shouldnot be executed or a floor price below which the trade should not beexecuted, and the method comprises fulfilling the at least one orderwhen the amount of the price improvement is more aggressive than thespecified value of aggressiveness relative to the one of the protectedNBB or the protected NBO of the financial instrument, subject to theceiling price or the floor price.
 19. The exchange order fulfillmentmethod of claim 1, wherein the price improvement value comprises atleast $0,001 greater than the protected NBB or protected NBO for buyorders or at least $0,001 less than the protected NBB or protected NBOfor sell orders.
 20. An exchange order fulfillment system comprising: atleast one processor of an electronic exchange to: receive a plurality ofelectronic communications from participant computing devices via acommunication network, each of the participant computing devices incommunication with a particular port provided by the electronicexchange, the communications comprising orders for trades of one or morefinancial instruments in a message format comprising one or more tagsand associated with a message protocol, at least one of the orderscomprising a plurality of tags identifying a financial instrument for atrade, an order side, and an amount of price improvement to be appliedto one of a protected national best bid (NBB) or a protected nationalbest offer (NBO) of the financial instrument for the trade; fulfill theat least one order when the amount of the price improvement is moreaggressive than a specified value of aggressiveness relative to the oneof the protected NBB or the protected NBO of the financial instrument;and report information associated with fulfillment of the at least oneorder to at least one of the participant computing devices using theparticular port in the message format or to a consolidated data streamat a particular interval of time for display on a user interface of theone of the participant computing devices.
 21. The exchange orderfulfillment system of claim 20, wherein the at least one order comprisesa buy order having an interest value that is greater than the protectedNBO.
 22. The exchange order fulfillment system of claim 20, wherein theat least one order comprises a sell order having an interest value thatis less than the protected NBB.
 23. The exchange order fulfillmentsystem of claim 20, the at least one processor further to receive aplurality of the orders from at least one participant computing devicefor a participant classified in at least two participant trading levels.24. The exchange order fulfillment system of claim 23, wherein the atleast one processor further to reject the at least one order when theamount of price improvement of the at least one order is less aggressivethan the specified value of aggressiveness of the one of the protectedNBB or the protected NBO, the specified value of aggressiveness for eachof the at least two participant trading levels being different from oneanother.
 25. The exchange order fulfillment system of claim 24, whereinthe participant trading levels comprise a member trading level and anon-member trading level.
 26. The exchange order fulfillment system ofclaim 25, wherein the member trading level has a first amount of priceimprovement that is less than a second amount of price improvement ofthe non-member trading level.
 27. The exchange order fulfillment systemof claim 24, the at least one processor further to accept orders fromparticipant computing devices for participants classified at a specifiedparticipant trading level.
 28. The exchange order fulfillment system ofclaim 20, wherein the at least one processor rejects the at least oneorder when the amount of price improvement of the at least one order isless aggressive than the specified value of aggressiveness of the one ofthe protected NBB or the protected NBO.
 29. The exchange orderfulfillment system of claim 20, the at least one processor further tocharge a participant a fee for placing a price improvement order againsta non-price improvement order, and provide a monetary credit for placingthe non-price improvement order against the price improvement order. 30.The exchange order fulfillment system of claim 20, wherein the at leastone processor further to publish a liquidity identifier identifying asymbol and a buy side or sell side of the at least one order.
 31. Theexchange order fulfillment system of claim 20, wherein the at least oneprocessor determines whether to allow or inhibit a retail order frominteracting with orders other than the at least one order according to atype of the retail order.
 32. The exchange order fulfillment system ofclaim 20, wherein the message protocol comprises at least one ofFinancial Information Exchange protocol (FIX) protocol and Binary OrderEntry (BOE) protocol.
 33. The exchange order fulfillment system of claim20, wherein the at least one processor: determines values assigned tothe plurality of tags of the at least one order; and based on the valuesof the plurality of tags, fulfills the at least one order when theamount of the price improvement is more aggressive than the specifiedvalue of aggressiveness relative to the one of the protected NBB or theprotected NBO of the financial instrument.
 34. The exchange orderfulfillment system of claim 20, wherein the at least one order comprisesa tag identifying the at least one order as a price improvement ordertype.
 35. The exchange order fulfillment system of claim 20, wherein theat least one order identifies a ceiling price above which the tradeshould not be executed or a floor price below which the trade should notbe executed, and the at least one processor fulfills the at least oneorder when the amount of the price improvement is more aggressive thanthe specified value of aggressiveness relative to the one of theprotected NBB or the protected NBO of the financial instrument, subjectto the ceiling price or the floor price.
 36. The exchange orderfulfillment system of claim 20, wherein the price improvement valuecomprises at least $0,001 greater than the protected NBB or protectedNBO for buy orders or at least $0,001 less than the protected NBB orprotected NBO for sell orders.
 37. A non-transitory computer-readablemedium having instructions stored thereon that, when executed by atleast one processor of an electronic exchange, cause the at least oneprocessor to perform operations comprising: receiving a plurality ofelectronic communications from participant computing devices via acommunication network, each of the participant computing devices incommunication with a particular port provided by the electronicexchange, the communications comprising orders for trades of one or morefinancial instruments in a message format comprising one or more tagsand associated with a message protocol, at least one of the orderscomprising a plurality of tags identifying a financial instrument for atrade, an order side, and an amount of price improvement to be appliedto one of a protected national best bid (NBB) or a protected nationalbest offer (NBO) of the financial instrument for the trade; fulfillingthe at least one order when the amount of the price improvement is moreaggressive than a specified value of aggressiveness relative to the oneof the protected NBB or the protected NBO of the financial instrument;and reporting information associated with fulfillment of the at leastone order to at least one of at least one participant computing devicein the message format using the particular port or to a consolidateddata stream at a particular interval of time for display on a userinterface of the one of the participant computing devices.
 38. Thenon-transitory computer-readable medium of claim 37, the operationsfurther comprising receiving a plurality of the orders from at least oneparticipant computing device for at least one participant classified inat least two participant trading levels.
 39. The non-transitorycomputer-readable medium of claim 37, the operations further comprisingrejecting the at least one order when the amount of price improvement ofthe at least one order is less aggressive than the specified value ofaggressiveness of the one of the protected NBB or the protected NBO, thespecified value of aggressiveness for each of the at least twoparticipant trading levels being different from one another.
 40. Thenon-transitory computer-readable medium of claim 39, wherein theparticipant trading levels comprise a member trading level and anon-member trading level.
 41. The non-transitory computer-readablemedium of claim 40, wherein the member trading level has a first amountof price improvement that is less than a second amount of priceimprovement of the non-member trading level.
 42. The non-transitorycomputer-readable medium of claim 37, the operations further comprisingrejecting the at least one order when the amount of price improvement ofthe at least one order is less aggressive than the specified value ofaggressiveness of the one of the protected NBB or the protected NBO. 43.The non-transitory computer-readable medium of claim 37, wherein themessage protocol comprises at least one of Financial InformationExchange protocol (FIX) protocol and Binary Order Entry (BOE) protocol.